<I>Rx</I> is target of FGF8 signaling in the developing eye. It is first expressed in mouse embryos at during gastrulation in the presumptive forebrain and becomes restricted to the developing retina, posterior pituitary and hypothalamus. Deletion of the <I>Rx</I> gene revealed that it is required for the formation of these structures, as its loss causes anophthalmia and ventral neural tube defects. To determine the role of <I>Rx</I> later in eye development and in adult retina physiology, we have produced mice that carry a conditional <I>Rx</I> allele so that normal <I>Rx</I> function can be disrupted by Cre-mediated recombination. Inactivation of <I>Rx</I> in the developing optic vesicle causes two defects: the lens doesnt form and the optic vesicle forms retinal pigmented epithelium at the expense of neural retina. Our data supports a model in which <I>Rx</I> is required for <I>Bmp4</I>, <I>Fgf8</I>, and <I>Fgf8/15</I> expression, which in turn is required for proper development of the eye.